Auburn University
Auburn University
  
 
 
 

From the Desk of
Executive Director, Kevin Robinson, CIA, CFE

We want to welcome you to the Auburn University Internal Auditing web site. We hope you will take the time to learn more about our department and the ways we can work with you to help you manage risks, improve processes, evaluate compliance and achieve your unit’s objectives.

Each month this column will be used to inform you of various hot topic issues relevant to higher education, common findings in our audits and reviews, questions submitted, or simply advice on how to ensure you have the controls needed in your operation. We will continue to work to make the material on our site relevant, timely, and useful. Please check in from time to time to see what has been added.

THIS MONTH: HOTLINES

Auburn University Ethics Hotline Administered by Ethicspoint, Inc.

If you are visiting our site for the first time, it is likely that you are curious about the new anonymous reporting system. These systems, often referred to as ''hotlines,'' have grown in popularity over the past couple of years largely as a result of numerous corporate financial scandals. Corporations such as Enron, WorldCom, and HealthSouth were among the more high profile organizations which faced scandal in their financial dealings. As a result of corporate ethical failings, the Sarbanes-Oxley Act of 2002 (SOX), was enacted. This act included a number of provisions designed to improve corporate governance, one of which was a method to anonymously report financial irregularities. SOX does not currently apply to not-for-profit organizations; however, there are several reasons we were asked to lead the implementation of a hotline for Auburn University.

5 Reasons Auburn University Implemented an Anonymous Reporting Hotline

  1. Auburn University's external auditor, PricewaterhouseCoopers, LLP, recommended in their management letter dated January 28, 2004, that the University establish a program to receive complaints relating to ethical matters. Internal Auditing was charged with implementing this new system since it directly relates to our function on campus.
  2. In a February 2004 report the Southern Association of Colleges and Schools (SACS) included a suggestion that we follow the advice of our external auditor and implement an anonymous reporting system. (Section 6.3.6 Suggestion 17)
  3. The National Association of College and University Business Officers (NACBUO) performed an extensive study and analysis of the Sarbanes-Oxley Act. In this report, NACUBO recommended institutions develop ''a confidential complaint mechanism'' for employees to ''communicate concerns about accounting, auditing, or internal control processes.''
  4. In January 2005 the American Institute of Certified Public Accountants released guidance which recommends that all organizations, including not-for-profits, develop anonymous reporting systems like those required by SOX..
  5. Various Congressional panels and committees have been evaluating SOX and whether the provisions from it should apply to not-for-profit organizations. At the Association of College and University Auditors mid-year conference held in early April 2005, one speaker commented that everyone he interacts with professionally believes that Sarbanes Oxley-like legislation will certainly apply to all not-for-profits including universities in the near future.

From my interaction with auditors across the country, this is clearly a growing trend on campuses. Over the past month I've had phone conversations with institutions in Texas and West Virginia advising them about our experience to date with hotline implementation. I've received e-mails from several other schools on this topic as well. From my evaluation, we are ''out front'' so to speak with respect to our implementation. I can say being the leader in something designed to promote ethical behavior is a good thing, one we should be proud that Auburn University has chosen to undertake. Will this solve all our problems? Certainly not, but it's a good step and one I'm glad Auburn University decided to take.

Kevin Robinson, CIA, CFE ( )
Executive Director of Internal Auditing

P.S. The Association of Certified Fraud Examiners noted the following in their research.

HOW FRAUD IS TYPICALLY DETECTED

  • 40% Tips (hotlines)
  • 24% Internal audit
  • 21% By accident
  • 18% Internal controls
  • 11% External audit
  • 1% Other

    Source: ACFE’s 2004 Report to the Nation on Occupational Fraud and Abuse